Re: Forwards

Posted by Ferdinando M. Ametrano-2 on Apr 24, 2002; 7:15am
URL: http://quantlib.414.s1.nabble.com/Forwards-tp2011p2012.html

At 03:01 PM 4/24/2002 +0100, Luigi Ballabio wrote:
>At 01:35 PM 4/24/02 +0200, Andre Louw wrote:
>(while discussing TermStructure implementations)
>>Why exactly would you calculate an instantaneous forward instead of
>>calculating out of spot? When would you use it?
>
>Well, the curve of the instantaneous forwards at time t and the curve of
>the forwards between 0 and t can be deduced from each other, so there's no
>phylosophical reason to favor one or the other.
The QuantLib term structure interface allows for modelling of discount,
zero rate or forward rate based curves. There is no preference towards
forward except that the only working bootstrapping procedure provided is
for forward rates. The discount based curve you committed to the CVS is a
welcome addition.
A TermStructure based on par swap is missing.

Luigi:
>[...] implementing a CompoundForward curve would lead you more naturally
>to model forwards from now to t. We could save both approaches by adding
>the latter forwards to the TermStructure interface and adding default
>implementations which calculate one given the other, as it is done for
>instance in DiscountStructure where you model the discounts and get
>forwards and zero yields for free.
A method for the calculation of the forward rate from time t1 to time t2
was an omission we should fix (please note t1->t2, not just now->t),
especially as long our Monte Carlo and Finite Difference framework grow up
to time-dependent interest rate.

As far as CompoundForward is concerned I haven't take a look at the code
yet, but in my mind compounding rule and compounding frequency should be
handled in a transparent way in the general TermStructure interface:
another omission of our original design when we assumed that everybody
would have been happy with annual continuos compounding.

ciao -- Nando